– EURUSD rally stymied by weak Ifo data
– Loonie rising with improved risk sentiment
– US dollar opens weak, extending Friday’s slide
USDCAD Snapshot open 1.2868-71, overnight range 1.2863-1.2945, close 1.2916, WTI oil $95.87, Gold $1734.76
The Canadian dollar is probing resistance after starting this week’s session on the defensive in Asia.
USDCAD climbed to 1.2945 from Friday’s close of 1.2916 due to a bout of negative risk sentiment which knocked the other commodity currencies lower. The gains were unwound in Europe and USDCAD dropped steadily to 1.2863 in NY trading.
The Federal Open Market Committee (FOMC) meeting is Wednesday, and traders are busy revising their predictions. Fed Chair Powell and colleagues successfully pushed back against calls for a 100 bp rate hike after another “hotter-than-hot” inflation print.
June CPI had risen higher than forecast but Fed officials preferred to additional data before advocating for the jumbo rate increase. Since then, USD data has been mixed leading to contradicting views among bank economists.
JPMorgan economists point to softening labour markets and “challenging activity momentum” to predict that rates may peak by year-end. Morgan Stanley economists say its too early for the Fed to stop tightening.
EURUSD traded in a 1.0180-1.0254 range. Disappointing German Ifo Survey data knocked prices from their peak as the results suggest German is on the cusp of a recession.
The IFO wrote: Sentiment in German business has cooled significantly. The ifo Business Climate Index fell to 88.6points in July, down from 92.2 points1 in June, to reach its lowest value since June 2020. Companies are expecting business to become much more difficult in the coming months. They were also less satisfied with their current situation. Higher energy prices and the threat of a gas shortage are weighing on the economy.
GBPUSD is trading at the top of its 1.1962-1.2056 band. The gains are on the back of the broadly weak US dollar after traders re-assessed the Fed rate outlook. UK recession and political uncertainty risks continue to support the downtrend, which is intact while prices are below 1.2220.
USDJPY is trading defensively in a 135.90-136.60 range after touching 135.58 Friday. The drop in US Treasury yields and talk that the fed funds rate will peak by year end weighs on prices. Traders are looking ahead to the release of the BoJ minutes tomorrow.
AUDUSD suffered in Asia initially, then rallied from 0.6880 to 0.6959 in NY, supported by broad US dollar weakness. NZDUSD followed suit.
The only US data of note is the Chicago Fed National Activity index.